Congress May Finally Have the Upper Hand

A flag bearing a portrait of Congress President Sonia Gandhi in Ahmedabad, Oct. 5.

India’s Congress party has some momentum heading into the winter session of Parliament. Its moves to attract foreign investment and cut the government’s subsidy bill challenged the widespread perception that New Delhi is hopelessly dysfunctional and sparked optimism that the two-decade-old reform process is back on track. Meanwhile, the Congress’s main opposition, the Bharatiya Janata Party, appears distracted with internal squabbles.

That means Congress, which heads the ruling United Progressive Alliance government, could be in a good position to push its legislative priorities in the session that begins Nov. 22, including bills to allow greater overseas investment in pensions and insurance, improve corporate governance and protect people who blow the whistle on misconduct by public servants.

“The Congress has reemerged,” said Narendra Kumar, a political science professor at Lucknow’s Babasaheb Bhimrao Ambedkar University. “The balance has tilted in their favor compared with a few months back.”

The recent foreign investment overhauls led to the departure from the coalition of a key ally, the Trinamool Congress backed by West Bengal Chief Minister Mamata Banerjee. But Mr. Kumar said Congress can get support from regional parties such as the Samajwadi Party and the Bahujan Samaj Party to move key legislation.

Until the middle of September, Congress was on the defensive, buffeted by bad economic news and a seemingly constant flow of corruption scandals implicating top party members and ministers. Credit ratings agencies warned of a potential downgrade of India’s sovereign debt to junk status because of the country’s fiscal mess.

The BJP made the most of the government’s distress, stalling all action in Parliament as it protested, among other things, alleged irregularities in the allocations of coal blocks to private firms. The BJP called for the resignation of Prime Minister Manmohan Singh over the issue. The PM denied any wrongdoing and stayed put, but the Congress’s legislative agenda also went nowhere.

Cut to Sept. 13, when the Congress-led government sprung into action aggressively. It raised the regulated price of diesel fuel and limited distribution of subsidized cooking gas – measures that were unpopular with the poor but that economists said were crucial to address India’s widening fiscal gap. The government is now targeting a budget deficit of 5.3% for the fiscal year ending March 31, down from 5.8% last year.

Though it could take years for the big money to start flowing, New Delhi was able to improve sentiment about the direction of the economy, replacing the prevailing mood of gloom and cynicism among businesses and investors with a bit of cautious hope.

Faced with a wave of resistance to the moves – and the Trinamool’s departure from the alliance – the Congress party held steady. Thus far, it hasn’t rolled back any of the measures, including its controversial decision to allow international retailers like Wal-Mart Stores to set up stores in India. Mr. Singh and Congress President Sonia Gandhi appear ready to stake their party’s political future on these reforms.

“Some of the steps were considered by many of our critics as politically impossible. We bit the bullet and did what we felt was the right thing to do,” Mr. Singh said in a recent speech.

Mr. Kumar said the BJP “appears to be floundering now” amid a leadership struggle in the party and may be in a weaker position to put up resistance to Congress’s agenda.The BJP also must be careful not to get a reputation with voters as the party of ‘no’ – opposing everything Congress proposes, even reforms that it backed a few years ago, just to score some political points.

“The party is united and there is no crisis,” said BJP spokesman Mukhtar Abbas Naqvi. He said the BJP will raise concerns over corruption, the retail sector foreign investment reform and price inflation during the Parliament session, and will hold organizational elections before January.

The prime minister held lunch meetings with Samajwadi Party leader Mulayam Singh Yadav and Bahujan Samaj Party head Mayawati over the past two days. Most observers say it was an attempt to shore up support for the coming session. The SP has 22 members in Parliament while the BSP has 21. (The Trinamool had 19 members.)

“This was just a routine lunch. Nothing more should be made out of it,” said Rashid Alvi, a spokesman for Congress. Spokesmen for the SP and the BSP couldn’t be reached for comment.

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